Why the Airdrie Savings Bank has remained independent, and its vision of the future

Q: Which Scottish bank claims to be almost unaffected by the credit crunch and is planning to expand its network and offer new products and services?

A: Airdrie Savings Bank, which has remained proudly independent since its formation in 1835, focusing on traditional banking and firmly rooted in its local community, and which is now reaping the benefits of its conservative approach.

Airdrie people are pretty independent folk, according to bank President Chris Ormerod, and it was this streak, and a belief that depositors would not be best served by the Trustee Savings Banks legislation of the 1980s, that led to the decision to keep Airdrie Savings Bank apart from the new order.

Pride in the bank runs deep. At the top of its governing structure sits a board of trustees – mainly local businessmen, representing the depositors’ interests and supervising the full time management team. “It’s a true monitoring board”, says Ormerod. “It isn’t involved in the day-to-day running of the bank, but it has considerable reporting back from the managers, and it is proactive as well in that a number of ideas have originated from the board.”

He adds that perhaps because it is not remunerated, it is a matter of intense pride in the board, “to put it at its bluntest, to justify the bank’s existence by developing it”.

The bank’s recent history is an interesting mix of conservatism and innovation (in 1977 it became the first in Britain to offer “real time banking” – the ability to check your account in its up-to-the-minute state). Until 25 or so years ago, it was purely a savings bank, with no loan business at all. Now it offers a slate of personal, mortgage and business loans (you don’t have to be an existing customer) which at present represent around 25% of its assets – still a far cry from the big mortgage lenders, whose securitised deals which led to the credit crunch effectively saw them lend around 10 times their asset base.

Loans now are limited more by size than type of deal. Ormerod freely admits that the bank has adopted a very risk averse stance (with balance sheet assets of £130 million, last year it wrote off a mere £53,000 in bad debts), but at the same time points to the fact that it has retained the traditional manager-customer relationship, with branch managers empowered to take lending decisions on the spot.

He also points to the bank’s ability, due to its smaller size, to tailor products to a customer’s requirements if a case can be made – a service of which solicitors among others have made effective use.

But the bank, for long effectively tied to its local branch network from which it operates in five west central towns in addition to head office, is now harbouring quite serious expansion plans which could extend its customer base across much of Scotland. Already offering telephone loans, the bank in addition hopes that in another year or so it will have joined the age of internet banking, which truly would give it a new dimension.

Yet it remains loth to lose that ethos of personal contact. “Even if there would not be the same face-to-face aspect, we want it still to be based on the one-to-one situation, and with access to senior managers”, says Ormerod. It will be interesting to see how that develops online.

For the legal profession, Airdrie Savings Bank offers firm and client accounts, bridging loans and trust/executry accounts, and also special facilities such as executry loans to permit payments of inheritance tax. Manager Iain Campbell, who oversees this side of the business, is also head of a new business development department which offers to meet customers in their own locations and talk about the services they want, whether or not part of the bank’s existing offering.

A number of legal firms not in the bank’s immediate area already transact with it through Legal Post or DX, and the bank claims that most of its new business comes through word of mouth.

What of the future? It seems pretty safe to say that Airdrie Savings Bank will remain just that. Courted from time to time by bigger players in the market, it has never considered that its depositors’ interests lay in accepting a takeover. Local people take a pride in it; customers value its traditional ethos; and it is of course a matter of considerable satisfaction that it has stayed clear of the problems that have hit the rest of the sector. And now that it is putting is head that little bit further above the parapet, it is likely to come into the reckoning for an increasing number of professionals considering their banking options.

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